Prepaid Credit Cards for People with Limited Credit
Prepaid credit cards are often considered similar to debit cards as they come with similar features and card benefits. However, unlike a debit card, a prepaid card allows you to load money into your account, often without attaching it to a bank account. You then have a card you can use wherever the card issuer, whether it’s Visa or MasterCard, is accepted.
Although commonly referred to as a type of credit card, there usually isn’t any line of credit associated with a prepaid card. You are simply using the money you loaded onto the account when you make purchases, which can be a huge benefit for those who want to avoid going over limits and overspending. While prepaid cards are typically designed as an option for consumers with poor credit or no credit, there are a number of other reasons besides the ability to manage spending that prepaid cards might be the preferred option even if you have a good or perfect credit score.
However, like many other types of cards that are available, prepaid cards come with their own disadvantages. If you find that these disadvantages outweigh the advantages, you may be better off opening a free checking account that comes with a debit card. Checking accounts often come with lower fees than prepaid cards and the debit cards associated with the account can be used just as you would a prepaid card.
If you’re looking for a prepaid card to use, the following cards are our editor’s picks.
Best Prepaid Card When You Need Cash
When you need cash, the last thing you want to worry about is where you can use your card to withdraw and how much it will cost you in extra fees. If you plan to use your card for withdrawing cash, make sure you are aware of these limitations.
Although you do need to have a PayPal account, it is one of the best prepaid cards for withdrawing cash from any ATM for a fee of $1.95 plus any individual ATM fees. This is important because it can be difficult and costly to withdraw your funds once you upload to other cards, which isn’t something you want to deal with when you need cash. This card also has a monthly fee of $4.95, but you can get your check direct deposited at no charge. As an additional benefit, you also get cash back offers from select stores and restaurants.
Best Prepaid Card for Cash Rewards
There aren’t very many prepaid cards that provide rewards programs. If you can manage the cost of carrying the card and any fees involved and earn extra cash rewards when you use the card, in the end, you could end up making a little extra money.
The American Express Serve card awards 1% cash back when you use the card for online or in-store purchase. This card, however, has a monthly fee of $5.95, and there may be other fees such as the $3.95 fee if you need to deposit cash to the card and you don’t have a checking account. If you link a checking account to the card there is no fee for reloading, which places this card as also one of the best for free reloads. You will need to calculate the cost of the card and how much you can earn from the cash back based on your purchases, to determine if it’s worth carrying this card. If you need a prepaid card with the Amex logo, this is one of the best ones available.
Best Low-Fee Prepaid Card
Prepaid cards are often notorious for additional fees to use the card, deposit, or withdraw. Because of the reputation, it’s important that you are aware of all the fees associated with using the card before you make your decision.
The Kaiku Visa Prepaid Card is well known for having the fewest fees of any prepaid card. This card has no extra maintenance fee if you deposit at least $750 per month. Plus, if you use one of 55,000 Allpoint ATMs, there are no ATM fees.
Other Prepaid Cards to Consider
There are a number of prepaid cards to choose from. Some of the other prepaid cards you might want to consider, include the following:
The AccountNow Gold Prepaid carries the Visa logo and has a monthly fee of $9.95. As an additional bonus of this prepaid card, you get $15 when you direct deposit to the card.
This is another prepaid card from AccountNow but instead carries the MasterCard brand logo. The activation fee is $4.95 and there is a fee of $1 per transaction.
If you have past credit problems and are a business owner, you’ll find that it’s just as difficult getting credit for your business. Plus, you might find it easier to control business spending with a prepaid card while separating your expenses from your personal finances. The Pex Prepaid for Business has an account setup fee of $49.95 and a monthly fee of $7.50 per employee card.
Advantages of Prepaid Credit Cards
- No credit check. If you have had credit problems in the past and you don’t qualify for other credit cards, a prepaid card provides an opportunity to use a card with a Visa or MasterCard logo because there are no credit checks.
- Simple application process. The application process for prepaid cards is often simple, quick, and usually guaranteed. As long as you provide your basic personal information, you can usually get signed up for a prepaid card right away.
- Checking account alternative. Most prepaid cards allow you to deposit, withdraw, and use just as you would a checking account. This makes prepaid credit cards great alternatives for consumers who also don’t qualify for traditional checking accounts.
Disadvantages of Prepaid Credit Cards
- No credit reporting. Prepaid credit cards are not reported to the credit bureaus, which means if your goal is to rebuild or build your credit, this type of card will not be useful. For consumers who have no credit or have had credit problems in the past, it’s best to go with a secured credit card that reports to the credit bureaus and helps you build credit.
- Extra fees. Although credit cards typically come with annual fees and interest, prepaid cards often come with these fees and expenses plus others. Prepaid cards might charge maintenance fees, monthly fees, application fees, and many other types of fee just to use the card. Because the CARD Act does not cover prepaid cards, it’s more important that you examine the fine print and look for any hidden fees.
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